About the Author

Cliff Holste is Supply Chain Digest's Material Handling Editor. With more than 30 years experience in designing and implementing material handling and order picking systems in distribution, Holste has worked with dozens of large and smaller companies to improve distribution performance.

Logistics News

By Cliff Holste

January 18, 2012

Small, Midsize & Large Distributors Approach Order Fulfillment Operations from Different Perspectives

DC Size & Complexity are Key Factors

While one-size-fits-all works well for many of our most popular consumer items, in the business world uniqueness is a highly sought after differentiator that often provides an important competitive advantage for the company. This is especially true in warehousing and distribution operations where the basic functions of receiving, storage, picking, and shipping are essential and common practices to all.

In this environment, how individual DCs approach such things as Returns Processing, Value Added Services, and Material Handling Automation can make a significant competitive difference while adding to the sophistication and complexity of their operations.

In addition to the range of services being offered the physical size of the DC along with the daily range and volume of products being picked and shipped matters when it comes to developing and successfully managing a robust order fulfillment operation.

The following attempts to explain how small, mid-size, and large DCs deploy different order fulfillment strategies while striving for a competitive advantage.

Holste Says:

How individual DCs approach such things as Returns Processing, Value Added Services, and Material Handling Automation can make a significant competitive difference while adding to the sophistication and complexity of their operations.

What Do You Say?

Smaller DC operations (under 100,000 sq. ft. and less than 10,000 cases pick/shipped per day) who offer specialty, unique, and/or high end products typically do a commendable job in picking and shipping products to customers with low order cycle times (shipping orders within 24 to 48 hrs.), while providing an array of customized boutique style services like kitting, custom labeling, monogramming and gift wrapping just to mention a few. Returns are generally not much of a factor in these smaller more customer centric operations.

Oftentimes, their distribution operations are manual as in “1970s push cart methods”. Therefore, they can be slow, error prone, and labor intensive, especially during seasonal peak periods. IT infrastructures and WMS functionality may also lag behind when compared to larger more automated operations.

Not surprisingly, there is some concern that their customer centric methods will not scale up to support their operations as the company grows. This may become an even bigger concern if/when the company launches an ecommerce initiative.

At some point these companies “hit-the-wall” relative to productivity gains and can no longer squeeze more capacity out of their operations without expanding facilities and/or adding more incremental labor. Complexity issues usually become more prevalent as volume grows. However, this may make it easier to justify adopting more automated processing methods.

Midsize DC operations (250,000 sq. ft. and under with less than 40,000 cases pick/shipped per day) who typically offer a large range of general consumer goods, including a broad mix of unique product lines, all of which are available for next day shipment, have a different set of challenges.

To compete effectively against their larger counterparts, many midsize DCs are seeking ways to make their operations more flexible and agile in order to satisfy their customers’ demand for more customized order fulfillment services, including ecommerce and a host of specialized value added services. In addition, many are being required to provide promotional, rainbow, mixed case, and even store-ready and aisle specific palletized loads.

Another major challenge for DCs in this midsize range is returns processing, also referred to as reverse logistics. How they handle returns can have a direct affect on customer satisfaction and bottom line performance. For this reason, many of these DCs, especially those with high-end and/or specialty products, outsource returns to companies who specialize in reverse logistics processes, see - “Technology Services Company Eases Reverse Logistics Woes of Large Manufacturers”. However, most take on the challenges associated with returns internally, usually at the risk of increasing operational complexity.

Large DCs: (over 40,000 case picks per day) are continually searching for ways to do more with less while lowering their per piece handling. DCs in this range are generally the result of consolidation of two or more smaller DCs.

For these high volume operations deploying the latest in material handling system technology is essential. They must give serious consideration to advances in Automated Case Picking (ACP) strategies such as those described in the Supply Chain Digest Report “Automated Case Picking 2009”. Where item picking is required, particular attention should be paid to the potential benefits of “Product-to-Picker” or “Put” systems. Additional information and system examples can be found in “Put Systems Provide A 3X Increase in Order Fulfillment”.

Final Thoughts

For far too many companies improving warehousing and distribution center processes remains a goal, not a reality. These companies appear to be sitting on the sidelines. While that is understandable given the current market uncertainties, over time it can lead to compliancy and even stagnation.

Still, the interest in material handling automation, even among small DCs, is strong and growing. Companies that are still operating with “1970s push cart methods” understand that the time has come to upgrade. This is especially true for those companies who recognize the importance of ecommerce on their business, as they also recognize the role DC automation plays in their ability to provide the required quick response systems.

Recent Feedback

May I add automated document (packing slips, invoices, statements, shipping labels) dunnage/void-fill, weight checking & package dimensioning to the list of areas that should be considered within the distribution center to help fulfillment cycle reduction. The above automated systems will be on display @ ModEx 2012 in Atlanta, Feb 6-9.